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At its first Cabinet meeting in 2023, the UAE government announced that one of its top five priorities for the year is to expand the UAE’s international economic partnerships. This priority underscores the UAE’s ambition to become a global leader in attracting international investment.
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Subject to certain exceptions, foreign entities will need to establish a presence in the UAE if they wish to conduct business.
A legal presence can be established in the UAE mainland or in one of the many free trade zones (free zones).
Mainland UAE
Foreign businesses seeking to do business in the UAE mainland have the option to set up:
Both branch and representative offices are extensions of the parent company and are therefore not separate legal entities of the foreign company. The representative office is only for marketing and promotional activities of the head office/parent company and cannot conduct any business. Branches may carry out any activity permitted by relevant laws.
PJSC is a company offering shares to the public by public subscription. The company’s issued share capital must not be less than AED 30,000,000 (US$8.17 million). Certain industry activities, such as banking and insurance, must be conducted through a listed company in the UAE.
The most common form of business corporation is the limited liability company. A limited liability company is a type of private company that can carry out all the activities included in its license in the respective emirate and outside the UAE. Under certain FDI laws, a limited liability company can consist of 1 to 50 shareholders.
Foreign Direct Investment Controls in the UAE Mainland
Over time, controls on foreign direct investment in the UAE mainland have become more relaxed. UAE law now allows 100% foreign ownership of onshore companies, barring restrictions.For more details on the history of how the law has evolved and which restrictions apply, please see our separate UAE Foreign Direct Investment Guide.
duty free area
Free zones are geographical locations within the UAE that have their own rules and regulations. The main advantage of Free Zones is that they allow 100% foreign ownership and offer additional tax benefits. However, the main disadvantage is that free zone entities are usually only able to conduct business within the designated area of ​​the free zone.
There are more than 45 independent free zones and business parks in the UAE, most of which are located in Dubai.
While Free Zone Authorities will regulate the registration and licensing of free zones, most matters will be governed by UAE federal law.These matters include tenancy, employment and criminal matters
Two exceptions are the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market Free Zone (ADGM), which have their own laws and courts.
All free zones will offer the option of establishing a limited liability company or a branch. Some free zones also offer the option to register a public company.
Most free zones are industry-focused. For example, Dubai Internet City and Dubai Multi Commodities Center focus on telecommunications and IT, DIFC and ADGM focus on financial services, Dubai Airport Free Zone and Jebel Ali Free Zone focus on ports and logistics.
Legal Consequences
The UAE government takes foreign investment seriously and encourages economic diversification.
The loosening of controls on foreign direct investment is a testament to this and is a positive step towards increasing diversification across sectors and boosting the UAE’s ambition to become a global leader in attracting foreign investment.
There are various options for starting a business in the UAE depending on individual business needs. Employing an appropriate corporate structure from the outset is crucial to the continued sustainability and profitability of a foreign investor’s strategy in the UAE.
Initial considerations when selecting the most suitable corporate structure may include:
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